Navigating Turbulent Waters: How Iran Continues Oil Exports Amid Conflict

Oil Exports Persist Despite Strait of Hormuz Tensions

In Hong Kong, maritime data indicates that nearly 90 vessels, including oil tankers, have traversed the Strait of Hormuz since the conflict with Iran began. Despite the strait being largely closed, Iran continues to export millions of barrels of oil.

According to Lloyd's List Intelligence, many of these ships are engaging in 'dark' transits, avoiding Western sanctions and likely linked to Iran.

Recently, vessels associated with India and Pakistan have also successfully navigated the strait, coinciding with intensified diplomatic discussions.

As crude oil prices surged past USD 100 per barrel, former US President Donald Trump urged allies to deploy warships to reopen the strait, aiming to lower oil prices.

Since the onset of the war in early March, most shipping activity through this crucial waterway, which accounts for about 20% of the world's crude oil supply, has been suspended. Reports indicate that around 20 vessels have been attacked in the region.

Nevertheless, Iran has managed to export over 16 million barrels of oil since early March, as estimated by Kpler, a trade analytics platform. China has emerged as the largest buyer of Iranian oil, largely due to Western sanctions.

Kpler's trade risk analyst, Ana Subasic, noted a 'continued resilience' in Iran's oil export volumes.

Iran has effectively utilized its control over this strategic chokepoint to maintain its oil sales and safeguard its export routes, according to Kun Cao, a client director at Reddal.

Estimates of Iran's oil exports align closely with maritime traffic data.

Between March 1 and 15, at least 89 ships, including 16 oil tankers, crossed the Strait of Hormuz, as reported by Lloyd's List Intelligence. This is a decrease from the pre-war average of 100 to 135 vessel passages daily.

It is believed that over 20% of these vessels were linked to Iran, with others affiliated with China and Greece.

Additionally, other ships have successfully navigated the strait.

The Pakistan-flagged oil tanker Karachi, operated by the Pakistan National Shipping Corporation, successfully passed through the strait recently, although a spokesman for the Pakistan Port Trust declined to confirm the route taken.

Two liquefied petroleum gas (LPG) carriers from India, Shivalik and Nanda Devi, both owned by the state-run Shipping Corporation of India, also traversed the strait around March 13 or 14. LPG is a primary cooking fuel for millions of households in India.

India's Foreign Minister, Subrahmanyam Jaishankar, mentioned to the Financial Times that these vessels were able to pass following negotiations with Iran. Iraq is also reportedly in discussions with Iran to facilitate the passage of its oil tankers through the Strait of Hormuz.

Richard Meade, editor-in-chief of Lloyd's List, suggested that vessels may be transiting with some level of diplomatic intervention, indicating that Iran may have established a 'safe corridor' for certain ships passing near its coast.

Some vessels in the vicinity of the strait have identified themselves as linked to China or have Chinese crews to mitigate the risk of attacks, according to an analysis from MarineTraffic. Analysts believe these ships are capitalizing on China's strengthened relations with Iran.

Since the conflict began, oil prices have surged over 40%, exceeding USD 100 per barrel. Iran has threatened to prevent any oil destined for the US, Israel, and their allies from passing through.

In an effort to stabilize oil prices, the US has stated it is permitting Iranian oil tankers to transit the Strait. Treasury Secretary Scott Bessent noted that Iranian ships have been allowed to exit to supply the global market.

The US has conducted airstrikes on military sites on Kharg Island, crucial for Iran's oil exports, but President Trump has indicated that Iran's oil infrastructure remains untouched for now.

Recent ship movements through the Strait of Hormuz suggest that it is not entirely 'closed,' but rather selectively restricted against certain traffic while still accommodating Iranian exports and a limited number of non-Iranian vessels.

However, if Iran's strategy is to exert pressure through elevated energy prices, the number of tankers permitted to pass through the Strait of Hormuz may be significantly restricted, as noted by strategists from Dutch bank ING.